TAX Alert | June 2016 | GAAR

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General Anti-Abuse Rule (GARR) – entry into force

On 14 June 2016, an amendment of Poland’s General Tax Code Act introducing the General Anti-Abuse Rule (GAAR) was published in the Polish Journal of Laws. GAAR is intended against taxpayers’ activities conducted with a view to achieving tax advantages “contrary to the intention of the legislators.” The Act will come into force on 15 July 2016.

WHO IS EXPOSED TO THE RISK OF GAAR

 According to the text of the amendment, an activity conducted primarily in order to achieve a tax advantage which is contrary, in the given circumstances, to the object and purpose of the tax legislation, will not provide the tax advantage if tax authorities decide that the taxpayer acted in an artificial way. The way in which taxpayer has acted will be deemed artificial, in particular, in the case of unreasonable transaction splitting, engagement of intermediaries even though there are no economic reasons for it, or elements in the taxpayer’s conduct which lead to a situation where a condition identical or similar to the original one is achieved. Therefore, multi-stage restructuring processes and tax optimisations are particularly exposed to GAAR.

GAAR will not apply as long as a taxpayer’s advantage in a given accounting period – or, alternatively, from an activity – is below PLN 100,000.
CONSEQUENCES OF GAAR BEING

If GAAR is applied, tax authorities are to assess the tax implications with reference to a situation which could have occurred if the taxpayer had conducted the “appropriate activity” or had performed no activity at all.

WHAT CAN YOU DO TO PROTECT YOURSELF

W To mitigate the risk of GAAR being applied, a taxpayer can apply to the Finance Minister for
a “securing opinion” which confirms that activities contemplated, commenced or completed by the taxpayer are not deemed to abuse the tax law.

ENTRY INTO FORCE AND TRANSITIONAL PROVISIONS

The Act will come into force on 15 July 2016. Tax advantages achieved thereafter may be questioned by tax authorities, even if they arise from activities completed before the amended law comes into force.

Private tax rulings issued after the Act comes into force will, as regards an activity deemed abusive and thus questioned by tax authorities, no longer secure the taxpayer.

 

HOW CAN TPA SUPPORT YOU

  

With the forthcoming date on which GAAR comes into force, we recommend analysing business transactions as soon as possible, both with reference to the activities which have already been performed and have current tax implications, as well as those which are only contemplated or in progress – to see if they conform to the object and purpose of the tax legislation.

If requested, we can assist you in the process of analysing and developing solutions to mitigate GAAR risks which would involve, among other things:

  • verifying business transactions for compliance with the new law;
  • preparing documentation to confirm that activities performed are economically reasonable (justified);
  • analysing the tax implications if GAAR is applied;
  • providing support in the process of obtaining a securing opinion from the authorities.

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